Saturday, 30 August 2014

Also
opens doors for US choppers (the AH-64E Apache above, and the CH-47 Chinook) worth Rs 15,000 crore

By Ajai
Shukla

Business Standard, 29th Aug 14

The Bharatiya
Janata Party (BJP)-led National Democratic Alliance (NDA) government has made
its first big decisions on equipping the forces, clearing acquisitions and
renewals worth Rs 17,000 crore on Friday.

The apex
Defence Acquisition Council (DAC), which met at New Delhi to clear the
purchases, emphatically favoured manufacturing in India, even when clearing the
procurement of foreign equipment. A long-running tender for buying 197 light
utility helicopters (LuH) from the global market has been scrapped, and will be
re-issued in the “Buy & Make (Indian)” category. This requires Indian
companies to build the LuH in India, in collaboration, if necessary, with
foreign partners.

“In
accordance with the government’s policy, this will create manufacturing jobs,
benefiting Indian industry to the tune of Rs 40,000 crore”, said a senior MoD
official who briefed Business Standard on the outcome of the DAC meeting.

Immediately
benefiting from this decision will be public sector aerospace behemoth,
Hindustan Aeronautics Ltd (HAL), which has already worked for four years on
developing an indigenous LuH. In 2010, the ministry of defence (MoD) had split
the military’s requirement of 384 LuHs into two --- with 197 being procured
over-the-counter (now cancelled); and HAL assured an order for 187 helicopters,
provided this was developed by 2017.

“We
appreciate this decision by the government. It is an important step towards
indigenising aerospace capabilities,” says RK Tyagi, the HAL chief.

HAL’s
progress on the LuH has been slowed by difficulties in selecting an engine for
the helicopter, Defence Minister Arun Jaitley told the Rajya Sabha on Aug 12.

The
emphasis on indigenisation is evident also in the decision to overhaul and
refit six of the navy’s 13 submarines. The so-called Medium Refit and Life
Certificate (MRLC) programme is a two-year process that involves stripping down
the submarine, repairing its hull extensively, and replacing worn parts.

The Rs
4,800 crore sanction clears the overhaul of four Russian-origin, Kilo-class,
and two German-origin HDW submarines. Of the Kilo-class vessels, two will be
refitted in Russia, and the other two in the naval dockyard in Mumbai. Mazagon
Dock Ltd, Mumbai, will overhaul both HDW submarines.

Support to
the indigenous Arjun main battle tank (MBT) continues, with the DAC renewing a
Rs 6,600 crore clearance for 118 Arjun Mark II tanks. This will equip two army tank
regiments, adding to an earlier order for 124 Arjun Mark I tanks.

The United
Progressive Alliance government had already cleared 118 Arjun Mark IIs. That
clearance had expired since the army has been evaluating the prototype tank for
two years. Today’s renewal allows the army to order the tanks from Heavy
Vehicles Factory, Avadi, when trials are completed.

Further
support was extended to the Arjun tank project through the clearance of 40
self-propelled artillery guns, worth Rs 820 crore. This gun system, termed a
“catapult”, consists of a 130-millimetre gun mounted on a Arjun tank chassis,
allowing it to keep up with tank columns and provide them fire support in
battle.

The
catapult will be developed by the Central Vehicle R&D Establishment in
Chennai, and then offered to the army for trials.

In a
decision that will please Washington in the run-up to Prime Minister Narendra
Modi’s visit next month, the DAC cleared offset proposals relating to the
purchase of two Boeing helicopters --- 22 AH-64E Apache attack helicopters; and
15 Chinook heavy lift helicopters. This removes the last hurdle to signing the
two contracts, together estimated to be worth Rs 15,000 crore.

Boeing has declined
to comment, but company sources say this is a key step that could allow the
contract to be signed by the year-end.

In a
clearance critical for the navy’s operational readiness, the DAC approved the Rs
1,770 crore purchase of Integrated Anti-Submarine Warfare Suites (IADS) for 11
warships --- seven frigates being built under Project 17A, and four destroyers
being built under Project 15B. As Business Standard first reported (May 16,
2014 “Warships in peril as defence
ministry blocks sonar purchase”) the MoD had blocked the import of crucial sonars
since the late 1990s, rendering 25 major Indian warships --- including the INS
Kolkata and INS Kamorta, commissioned this month by the prime minister and
defence minister respectively --- extremely vulnerable to attack by enemy
submarines.

The navy
will also get relief with the DAC permitting commercial bids to be opened in
the Rs 1,800 crore tender for 16 naval multi-role helicopters, which fly from
warships and detect enemy submarines. With one of the two vendors ---
NHIndustries, part-owned by Finmeccanica --- now banned, this has the potential
for the other vendor, US company, Sikorsky, to win the contract.

Also cleared was a Rs 900 crore dedicated mobile
communications system for army troops deployed in Ladakh and the eastern
command. Since border areas are poorly covered by commercial mobile service
providers, the army intends to establish its own mobile network all along the
borders.

Wednesday, 27 August 2014

The navy
has lifted the shroud of secrecy over a major new sea base being built on India’s
eastern coast, which will be home to the first indigenous aircraft carrier, INS
Vikrant, and an armada of warships under the Eastern Naval Command.

The new
base, on the Bay of Bengal, will also house India’s nuclear ballistic missile
submarine (SSBN) force. Current plans involve building six SSBNs, to form the
underwater leg of the country’s nuclear triad. The first, INS Arihant, will
soon be operational; the second and the third are currently being built.

For years,
the ministry of defence (MoD) has refused to even acknowledge the existence of
the secret new base, which will come up around the coastal hamlet of Rambilli,
50 kilometres south-west of Visakhapatnam. The plan is code named “Project
Varsha”.

Divulging
that the new base will house conventional as well as nuclear warships, Vice
Admiral Satish Soni, the head of Eastern Naval Command, told Business Standard,
“We don’t talk about it much for obvious reasons. There are plans for a new base,
and we hope to see one in a matter of 7-8 years.”

India’s
eastern seaboard on the Bay of Bengal, with deep water and harbours with over
10 metres depth of water, is far better suited as a nuclear submarine and aircraft
carrier base than the western seaboard, where the shallower Arabian Sea is
barely 4 metres deep along the coast.

Like China’s
massive nuclear submarine base at Hainan Island, the depth of water at Rambilli
will allow submarines to enter and leave the base without being detected by
satellites. This secrecy is crucial for SSBNs, which must remain undetected
when they leave for months-long patrols, carrying nuclear tipped ballistic
missiles.

China’s
rapid naval build-up, and its belligerent handling of maritime disputes with
smaller neighbours in the South China Sea and East China Sea, has caused New
Delhi to focus keenly on enhancing the operational posture of the eastern
fleet, which must counter any threat from China.

The same
concerns had, in 2001, led to the creation of the tri-service Andaman &
Nicobar Command (ANC), 1,225 kilometres from Visakhapatnam in the Bay of Bengal.
The ANC dominates the Malacca Strait, and the shipping routes between West Asia
and South-East Asia.

Visakhapatnam
is home to the eastern fleet, India’s biggest, with 50 warships. The new base at
Rambilli will decongest Visakhapatnam --- also a major commercial hub --- and
provide a secure base that is removed from population centres.

Western
Naval Command already has such a base, INS Kadamba, built in 2005 to decongest
Mumbai. Located at Karwar, near Goa, it is home to the aircraft carrier, INS
Vikramaditya, and much of the western fleet. Being built in several phases,
that project is code named “Project Seabird”.

With INS
Vikrant harboured in Rambilli after the aircraft carrier is commissioned in
2018, the naval air base at Visakhapatnam --- INS Dega --- is being expanded to
house the Vikrant’s MiG-29K and Tejas fighters and its helicopters, when the
aircraft carrier is not at sea.

Soni says the
government has approved Rs 200 crore for infrastructure at INS Dega for the
Vikrant’s MiG-29K fighters; and another Rs 200 crore for the navy’s Hawk trainers
that will be based at Visakhapatnam.

Visakhapatnam’s
importance as a naval aviation centre has been boosted by the recent
identification of a secondary airfield, to which aircraft can be diverted in
case of emergencies or bad weather at Visakhapatnam. Soni says land acquisition
has begun, and the state government has provided an NOC to the navy.

“We are
looking at Bobilli, a disused, World War II airfield about 45 nautical miles
from here (Visakhapatnam). We will have fighters flying from here so we will
need an alternative base, to which flights can be diverted. Bobilli is north
west of Visakhapatnam towards Vijaywada”, said Soni.

Three days
ago, Defence Minister Arun Jaitley promised a new policy that would punish dishonest
vendor companies without blocking Indian acquisitions and the flow of spares.
On Tuesday, the ministry of defence (MoD) issued a directive on how it will
deal with group companies of Italian defence giant, Finmeccanica, whose chief
executive, Giuseppe Orsi, was arrested in Italy last year on charges of bribing
Indian officials to facilitate the sale of VIP helicopters to India.

While the
MoD’s directive on the Finmeccanica group does not constitute policy, it
suggests a more flexible approach than the rigid blacklisting and banning that the
previous defence minister, AK Antony, followed. The new approach attempts to
ensure that ongoing contracts and acquisitions be minimally affected or
delayed.

The
directive prescribes six differentiated MoD responses, depending upon the stage
that a procurement contract is at.

First,
where a Finmeccanica company is executing a signed contract, it should be
proceeded with. This will ensure that work continues on the radar systems that
Selex ES is fitting on the indigenous aircraft carrier, INS Vikrant.

Second,
where a contract has been fully executed, but spares and upgrades are required
regularly, that can continue. This will ensure the continued supply of
equipment like the 76 millimetre naval gun, which Bharat Heavy Electricals Ltd
(BHEL) builds under licence from Otomelara.

Third,
where the vendor has been declared as L-1 (cheapest bidder) after tendering,
“all such procurement/acquisition cases shall be put on hold until further
orders.” This is the most far-reaching decision the MoD has taken, given that
WASS has been declared the L-1 bidder in the tender for 98 Black Shark
torpedoes for India’s six Scorpene submarines being built in Mumbai. German
company, Atlas Elektronik, had hotly contested the decision. Now, the Seahake
torpedo, offered by Atlas, emerges as a frontrunner in the $300 million
contract.

Fourth,
where the tender process is under way, but no L-1 has yet been declared,
Finmeccanica companies will be eliminated from consideration, provided there
are alternatives. This relates to tenders like the procurement of multi-role
helicopters (MRH) for the navy, where two companies are in contention --- US
company, Sikorsky; and European consortium, NHIndustries, which is part owned
by AgustaWestland. If NHIndustries is eliminated, Sikorsky emerges as the
single vendor --- a situation potentially fraught with other difficulties.

Fifth,
Finmeccanica companies are to be eliminated from all acquisitions where
tendering is yet to commence, provided there are valid alternatives.

This knocks
out Alenia Aeromacchi, and its C-27J aircraft, from the $2.5 billion tender to partner
an Indian private company in building 56 transport aircraft in India, to
replace the ageing Avro-748 transport aircraft.

Sixth and
final, where a Finmeccanica group company is a sub-contractor to another
foreign vendor, that contract would continue. This covers upgrades that Selex
ES is reportedly handling as a sub-contractor to a Russian company.

Interestingly,
the new policy does not cover the procurement of AW-101 VIP helicopters, which
is at the root of the current situation. While India has taken delivery of
three of the contracted 12 helicopters, it has also recovered most of the money
it paid, by encashing AgustaWestland’s bank guarantees worth Euro 228 million.
MoD sources say New Delhi is no longer interested in the AW-101, and is looking
to sell those.

The MoD directive
on dealing with Finmeccanica has already been issued to relevant departments
within the ministry. Top ministry sources say delay was caused by the change in
government, since the new Attorney General had to be consulted before issuing
the directive.

The MoD
spokesperson says a copy of the letter has been issued to Finmeccanica.
However, Finmeccanica officials tell Business Standard that they have not
received the new directive.

Italian prosecutors
have alleged that AgustaWestland paid some euro 51 million to middlemen, Guido Haschke,
Christian Michel and Carlo Gerosa, to seal the deal for VIP helicopters,
funnelling the money through software companies, Mohali-based IDS Infotech and
Chandigarh-based Aeromatrix Info Solutions Pvt Ltd. After Orsi was arrested on
February 12, 2013, the MoD froze the contract, suspended payment to
AgustaWestland, and initiated a Central Bureau of Investigation (CBI) enquiry.

The CBI has
filed First Information Reports against 15 people, including former IAF boss,
Air Chief Marshal S P Tyagi. However no charges have been filed against
Finmeccanica or AgustaWestland, which has invoked arbitration over the
termination of the contract.